Appraisal seems high- affects estate taxes

[sandy wallace]

My brother passed away Dec. 24th 2001. He owned property in another state and we have had to have that property appraised as part of probate and to help us figure estate taxes. We do not live in the state where the property is located so hired an appraiser through a reference. He seemed to do a fine and professional job, but the appraisal seems high to us. He supports his figure with current listings (all listed for over 1 yr.) and three pieces of property within the same development that sold. Our research has indicated that the properties sold, sold over a year ago (prior to 9/11/02). In addition, statistics we have been able to obtain indicate that the sale of residential vacant land is suffering in the region. At the end of 2001, (the date that the appraisal is to have been based on) the overall sales in the area were down 14%, and for the first time in years the overall average price per transaction on vacant land was down 16%. This coupled with the fact that listings of vacant land have doubled would indicate to me that a lower appraisal would be in order and perhaps the appraiser is not taking these facts into consideration. We have phoned him with our concerns, but he says that listings and "comps" from previous sales are all he can go on and he is not able to change the appraisal. The appraised value of the land will greatly inflate our estate tax burden and we are wondering if there is anything we can do. Thank you in advance for any advice you may be able to give, it will be deeply appreciated.

 

[Dale Smalley]

Are you asking him to change his value so you have less taxes to pay?

 

[George Hatch]

Ms. Wallace,

The appraisal and appraisal report that you have on this property represents that appraiser's opinion of value for that property as of the date of the appraisal. I am assuming this is a parcel of vacant land from your desciption of events and that the purpose of the appraisal was to determine the value of the property as of the date of death.

As a practical matter, the appraiser should have been concentrating of sales data as of 12/2001, just a couple months after 9/11/2001. It may be appropriate for the appraiser to consider data that closed after 12/2001, but the farther away from the date, the less relevant that data becomes. It doesn't matter what the land prices are now or even what they were in 06/2002; only what they would have been as of 12/2001. If there was a listing in 12/2001 that later sold, it probably set the upper limit of value for the subject as of 12/2001; the appraisal probably shouldn't be any higher than that, all other factors being considered.

As far as the volume of sales data being down in December as compared to earlier in the year, this is common in many areas of the nation and occurs every year, with or without 9/11. You didn't mention the state, so I can't really tell you if this is a factor or not. Suffice it to say that the newspaper articles that cite regional statistics are usable primarily on a regional basis, and may not apply directly to your appraisal situation.

I would suggest that you confab with the appraiser to see if they had any information that land prices actually were falling in 12/2001, or even in 01/2002, in that area. As a local, the appraiser will be much more in tune with these changes than any newspaper columnist. Even if there is insufficient data in the land market, there may be some indication in the local home sales market that prices for properties were declining, thus providing at least some justification for adjusting the pre-9/11 land sales downward.

Do not be surprised if there is no conclusive evidence in the home market or other land markets. I have not seen a detrimental impact on pricing of most property types as a result of 9/11 or the weak economy in my market. Prices are actually still on the rise.

George Hatch

 

[Terrel L. Shields]

For vacant tracts, and I assume this is a big one if you are bumping estate tax limits, there is always differences between appraisers in my experience. If a large tract, a mere $100/acre can make a big difference. I was recently asked to appraise a 500+ acre ranch near an 8 year old airport. A speculator had bought several large tracts nearby for $12,000/ac. That speculator was using someone else's money, and they wised up and fired the guy in March. No sales have occurred nearby since. I went further out and picked up sales that were more in line with the real world.

I suggest you hire a real estate counseler (appraiser) to look the report over for flaws. If he concludes the report is reasonable, then likely it is. If he has questions or cannot draw the same conclusions from the same data, hire yet a third appraiser to do it over again. 34% of $50,000 buys a heck of alot of appraising.

The problem with any "event" like 9/11 is that sales simply do not occur, the market slows dramatically, then slowly picks back up. In my area, by the end of 2001, the dip in prices had already been recouped and by Feb was eclipsed.

 

[Steve Owen]

Terrel got me curious. So, I pulled up our MLS and counted the number of single family sales in each of three years. (I used SFR's because I believe there would not be enough vacant land tracts in any given period to produce useable data.)

From 9/11/2000 to 10/11/2000 there were 127 SFR sales in our MLS.

From 9/11/2001 to 10/11/2001 there were 156 SFR sales in our MLS.

From 9/11/2002 to 10/11/2002 there were 183 SFR sales in our MLS (as of 10/24/2002, subject to change with late submissions)

From this extremely preliminary data, I would say that 9/11 had zero effect in our marketing area. What do the rest of you think, did it have an effect in your area?

 

[Mike Garrett RAA]

We have seen no appreciable downward pressure as the result of 9/11.

Always amazes me that someone who lives in a different state would know more than an appraiser in the state where the property is located. Ever consider there weren't more current sales?

 

[Terrel L. Shields]

I would say that 9/11 had zero effect in our marketing area.

Our MLS changed in 2000

for 9/11/01-11/04/01 $100,000-$400000 range for houses, 40 - 100K for land.

RES - $158,859, 214 sales, 104 DOM
LAND- $66,875, 258 DOM

9/11/02 - 11/04/02

RES - $169,971, 258 sales, 103 DOM
LAND - $68,000, 302 DOM

I attribute the increased price of residences to lower interest rates, since developers are the bulk of land sales, they are paying commercial interest rates, not el cheapo homeowner rates.

Not much difference, but immediately following 9/11 several contracts fell and there was market confusion for several weeks. Farm contracts were affected severely for about 1 month.

 

[Anonymous]

Unless you are right on the border of tax brackets you are shooting yourself in the foot. It's simple math. Let's say you have to pay 40% estate taxes on a 100K property. Sure you are paying 40K in taxes but you keep 60K. Now if the appraised value is 80K you are only paying 32K in taxes but you only keep 48K. In response to the appraisers actions, my only concerns would be the older sales dates and the weight given to sales vs. listings. Keep in mind that we cannot fabricate comps and in some areas, no truly comparable sales have taken place more recently.